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Reasons Why You Should Avoid Betting on Avery Dennison (AVY)
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Avery Dennison Corporation (AVY - Free Report) has failed to impress investors with lower volumes across all segments for the past few quarters due to apparel inventory reductions. The company is also bearing the brunt of input cost inflation and supply-chain issues, which are further denting margins. These factors are likely to impede the company’s earnings in the quarters ahead.
Let’s discuss the factors that are taking a toll on the company.
Negative Q2 Results: Avery Dennison has delivered adjusted earnings of $1.92 per share in the second quarter of 2023. The bottom line marked a 27% year-over-year decline. Total revenues fell 10.9% year over year to $2,091 million in the quarter.
Southbound Estimate Revisions: The Zacks Consensus Estimate for AVY’s third-quarter 2023 earnings is pegged at $2.08 per share. The consensus estimate for third-quarter earnings has moved south by 9% in the past 60 days.
Lower Volumes Denting Performance: Avery Dennison’s volumes have been affected by apparel inventory reductions over the past few quarters. Even though retailers and brands have run through some of their excess inventory, the reduction is not uniform across the company's customer base. This is likely to impact the company’s results in the upcoming quarters.
As a result, Avery Dennison expects a third-quarter 2023 adjusted EPS of $2.00-$2.20. The mid-point of the guidance indicates a year-over-year decline of 15%.
Elevated Costs & Supply-Chain Issues Act as Woes: The company is bearing the brunt of input cost inflation. Particularly, paper and energy costs are likely to be higher in the ongoing quarter. It expects inflation to continue to have an impact on its margins.
Strong demand and supply constraints continue to push further raw material, labor and freight cost increases. The recent surge in fuel prices adds to the headwinds. These factors are expected to dent the company’s margins.
Avery Dennison has been dealing with supply-chain challenges, which are likely to continue impacting its results. Currency translation is also likely to hurt its top-line growth.
Price Performance
AVY shares have gained 9.5% in the past year compared with the industry’s growth of 10.3%.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #4 (Sell).
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for 2023 earnings has moved north by 11.4% in the past 60 days. Its shares gained 51.6% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares gained 22.8% in the last year.
The Zacks Consensus Estimate for Eaton’s 2023 earnings per share is pegged at $8.80. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 3%. Shares of ETN rallied 68.8% in the last year.
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Reasons Why You Should Avoid Betting on Avery Dennison (AVY)
Avery Dennison Corporation (AVY - Free Report) has failed to impress investors with lower volumes across all segments for the past few quarters due to apparel inventory reductions. The company is also bearing the brunt of input cost inflation and supply-chain issues, which are further denting margins. These factors are likely to impede the company’s earnings in the quarters ahead.
Let’s discuss the factors that are taking a toll on the company.
Negative Q2 Results: Avery Dennison has delivered adjusted earnings of $1.92 per share in the second quarter of 2023. The bottom line marked a 27% year-over-year decline. Total revenues fell 10.9% year over year to $2,091 million in the quarter.
Southbound Estimate Revisions: The Zacks Consensus Estimate for AVY’s third-quarter 2023 earnings is pegged at $2.08 per share. The consensus estimate for third-quarter earnings has moved south by 9% in the past 60 days.
Lower Volumes Denting Performance: Avery Dennison’s volumes have been affected by apparel inventory reductions over the past few quarters. Even though retailers and brands have run through some of their excess inventory, the reduction is not uniform across the company's customer base. This is likely to impact the company’s results in the upcoming quarters.
As a result, Avery Dennison expects a third-quarter 2023 adjusted EPS of $2.00-$2.20. The mid-point of the guidance indicates a year-over-year decline of 15%.
Elevated Costs & Supply-Chain Issues Act as Woes: The company is bearing the brunt of input cost inflation. Particularly, paper and energy costs are likely to be higher in the ongoing quarter. It expects inflation to continue to have an impact on its margins.
Strong demand and supply constraints continue to push further raw material, labor and freight cost increases. The recent surge in fuel prices adds to the headwinds. These factors are expected to dent the company’s margins.
Avery Dennison has been dealing with supply-chain challenges, which are likely to continue impacting its results. Currency translation is also likely to hurt its top-line growth.
Price Performance
AVY shares have gained 9.5% in the past year compared with the industry’s growth of 10.3%.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the Industrial Products sector are Caterpillar Inc. (CAT - Free Report) , Astec Industries, Inc. (ASTE - Free Report) and Eaton Corporation plc. (ETN - Free Report) . CAT and ASTE sport a Zacks Rank #1 (Strong Buy), and ETN has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for 2023 earnings has moved north by 11.4% in the past 60 days. Its shares gained 51.6% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares gained 22.8% in the last year.
The Zacks Consensus Estimate for Eaton’s 2023 earnings per share is pegged at $8.80. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 3%. Shares of ETN rallied 68.8% in the last year.